THQ (NASDAQ:THQI) had an ugly trading session yesterday. After an analyst downgrade, shares closed 3.4% lower. Still, the company's got good news in the form of a press release on the publisher's initial foray into games for Nintendo's (OTC BB: NTDOY.PK) Wii.
THQ will have four games available around the time of the system's launch, based on the company's lucrative licensing relationship with Disney's (NYSE:DIS) Pixar properties and Viacom's (NYSE:VIA) Nickelodeon. The titles include Cars, based on the Disney CGI cartoon, and three titles from Nick: Barnyard;Avatar: The Last Airbender; and SpongeBob SquarePants: Creature from the Krusty Krab.
These games should move a lot of copies during the holiday season. Disney and Viacom have done a great job of inculcating their respective brands among kids across the globe. In turn, kids have done a similarly superb job of educating their parents about these properties. And, heck, what adult doesn't like goofing around as everybody's favorite inhabitant of a pineapple under the sea?
The Wii may carry a reputation as a kiddie console relative to Sony's PlayStation and Microsoft's Xbox systems. But Nintendo's reputation for cute characters like Mario and Donkey Kong should actually work to both Nintendo's and THQ's advantage, since these launch titles will fulfill that brand image. THQ isn't the only company with a great portfolio of licensed assets -- Activision (NASDAQ:ATVI) and Electronic Arts (NASDAQ:ERTS) possess their fair share, as well -- but the one-two punch of Disney and Nick is a powerful differentiating element.
While I understand that some video game stocks have already had a run, and that valuation should always be a concern, I still believe that when it comes to earnings growth potential and stock price appreciation, shareholders haven't seen anything yet. Now that the next-generation consoles are due next month, investors should carefully consider whether analysts' downgrades in this sector correspond with reality. As more people buy these systems over the next few years, gamers will demand more and more new titles, and publishers like THQ will be filling that demand.
THQ is a force to be reckoned with in the world of video games, as its latest four titles demonstrate. With its valuable portfolio of properties, both original and licensed, the company's definitely not one to bet against.
Video games are hot, and so are these Takes:
- A Bully in Your Portfolio
- Get in the Game
- I'm not so sure I would short Activision.
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Fool contributor Steven Mallas owns shares of Disney and Activision. Microsoft is a Motley Fool Inside Value pick. The Fool has a non-bullying disclosure policy.
